-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HJAdUiqrgSZmdBIiHi+kUsQE80hU8eUHksicRfrReq3Cucnj6HZwp02roVqlwS2e kiP3VdJIZMKLjCUlQqQfbg== 0000950115-98-000809.txt : 19980504 0000950115-98-000809.hdr.sgml : 19980504 ACCESSION NUMBER: 0000950115-98-000809 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980430 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CRW FINANCIAL INC /DE CENTRAL INDEX KEY: 0000943809 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-CONSUMER CREDIT REPORTING, COLLECTION AGENCIES [7320] IRS NUMBER: 232691986 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: SEC FILE NUMBER: 000-26014 FILM NUMBER: 98605369 BUSINESS ADDRESS: STREET 1: 443 S GULPH RD CITY: KING OF PRUSSIA STATE: PA ZIP: 19406 BUSINESS PHONE: 6109625100 MAIL ADDRESS: STREET 1: 443 S GULPH RD CITY: KING OF PRUSSIA STATE: PA ZIP: 19406 10-K/A 1 FORM 10-K/A ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K/A (Mark One) /X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1997 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______________ to _____________ Commission File Number 0-26015 CRW FINANCIAL, INC. (Exact name of registrant as specified in its charter) Delaware 23-2691986 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 200 Four Falls Corporate Center Suite 415 West Conshohocken, PA 19428 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (610) 878-7429 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange Title of each class on which registered ------------------- ------------------- NONE NONE Securities registered pursuant to Section 12(g) of the Act: Common Stock, par value $.01 per share (Title of Class) Indicate by check mark whether the Registrant (1) has filed all reports to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. YES X. NO___. Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. /X/ The aggregate market value of the voting stock held by non-affiliates of the Registrant is approximately $15,437,000. Such aggregate market value was computed by reference to the closing price of the Common Stock as reported on the NASDAQ Small Cap Market on March 25, 1998. For purposes of making this calculation only, the Registrant has excluded shares held by all directors, executive officers and beneficial owners of more than ten percent of the Common Stock of the Company. The number of shares of the Registrant's Common Stock outstanding as of March 25, 1998 was 6,435,486 shares. ================================================================================ PART III ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Directors The board of directors of CRW Financial, Inc. ("CRW" or the "Company") consists of five persons, each of whom has been elected for a term expiring at the annual meeting of CRW stockholders indicated below and until his successor shall have been elected and qualified. The following table sets forth information concerning the individuals who are serving as directors of CRW. Term Expires at Name Age Annual Meeting in - ---- --- ----------------- J. Brian O'Neill.............................. 38 1998 Eustace W. Mita............................... 44 2000 Mark DeNino................................... 44 1998 Bernard Morgan................................ 61 2000 Robert N. Verratti............................ 54 1999 J. Brian O'Neill has been the Chairman of the Board of Directors and Chief Executive Officer of CRW since May 1995 and held the same positions with Casino & Credit Services, Inc. ("CCS"), CRW's former parent company, from July 1992 to May 1995. Mr. O'Neill was also Chairman and CEO of TeleSpectrum Worldwide Inc. ("TLSP") from April 1996 to March 1998, Mr. O'Neill is no longer employed by TLSP, but continues to be a member of TLSP's Board of Directors. Eustace W. Mita has been a director of the Company since August 1996 and has served as Chief Operating Officer of HAC Group, Inc., an automobile leasing training company, since 1990. In 1984, Mr. Mita founded Mita Leasing, an automobile retail leasing company, and served as its President until the company was sold in 1992. Mr. Mita is also currently a director of First Republic Bank in Philadelphia, Pennsylvania. Mark DeNino has been a director of the Company since February 1996 and has been a general partner and managing director of Technology Leaders II Management, L.P., the general partner of Technology Leaders II, L.P., which is a venture capital firm and a significant shareholder of the Company, since 1994. For more than three years prior to that, Mr. DeNino was President of Crossroads Capital, Inc., an investment banking firm. Mr. DeNino is also currently a director of Integrated Systems Consulting Group, Inc. and Aloette Cosmetics, Inc. Mr. DeNino graduated from the Graduate School of Business Administration of Harvard University with an M.B.A. degree and from Boston College with a B.S. degree in finance and accounting. Bernard Morgan has been a director of the Company since February 1996 and, prior to retiring in 1989, worked for First Fidelity Bancorporation and Fidelcor for 20 years in various positions including Vice Chairman, Chief Executive Officer, Deputy Chairman, Chief Operating Officer, President and Executive Vice President. Mr. Morgan is also currently a director of Atlantic Electric, Inc. Mr. Morgan received his B.A. degree from St. Joseph's University and his M.B.A. degree from the Wharton School, University of Pennsylvania. Robert N. Verratti has been a director of the Company since March 1996 and has been Chief Executive Officer of National Media Corporation since May 1997 and CEO of Charlestown Investments, Ltd., an investment company, since 1985. Prior to 1985, Mr. Verratti served as acting President of Great Western Cities, Inc., also an investment company. He is a graduate of the U.S. Naval Academy and served in the nuclear submarine service. CRW's Restated Certificate of Incorporation divides the CRW Board into three classes, with three-year staggered terms for each of the Class I, Class II and Class III directors, respectively. Accordingly, Mr. Verratti will hold office until the annual meeting of stockholders to be held in 1999, Mr. O'Neill and Mr. DeNino will hold office until the annual meeting of stockholders to be held in 1998 and Mr. Mita and Mr. Morgan will hold office until the annual meeting of stockholders to be held in 2000. Committees of the Board of Directors The CRW Board has established a Special Committee of its independent Board Members to consider various alternatives to enhance shareholder value, an Audit Committee which, among other things, considers the overall scope and approach of the annual audit and recommendations of the audit performed by CRW's independent accountants; recommends the appointment of independent accountants; considers significant accounting methods adopted or proposed to be adopted; and considers procedures for internal controls. The Special Committee is comprised of Mr. Verratti. The Audit Committee is comprised of Mr. DeNino, Mr. Morgan and Mr. Mita. The CRW Board has also established a Compensation Committee which evaluates and establishes all executive compensation arrangements. The Compensation Committee is comprised of Mr. DeNino, Mr. Mita and Mr. Verratti. Executive Officers (Other than Directors) Jonathan P. Robinson, 33, has been the Vice President, Treasurer, Secretary and Chief Financial Officer of the Company since May 1995 and held the same positions with CCS from April 1993 to May 1995. Mr. Robinson was also interim Chief Operating Officer for TLSP from September 1997 to April 17, 1998 and Director of Acquisitions for TLSP from April 1996 to April 17, 1998. From June 1986 to April 1993, Mr. Robinson was employed by Arthur Andersen & Co., certified public accountants, where he last served as an Audit Manager. Mr. Robinson is a certified public accountant. CRW knows of no family relationships between any director or executive officer other than the fact that Messrs. O'Neill and Mita are cousins. Section 16(a) Beneficial Ownership Reporting Compliance Section 16(a) of the Securities Exchange Act of 1934 requires the Company's officers and directors and persons who own more than ten percent of a registered class of the Company's equity securities (collectively the "Reporting Persons") to file reports of ownership and changes in ownership of the Company's securities with the Securities and Exchange Commission and to furnish the Company with copies of these reports. Based on the Company's review of the copies of these reports received by it, and written representations received from Reporting Persons, the Company believes that all filings required to be made by the Reporting Persons for the fiscal year ended December 31, 1997 were made on a timely basis. ITEM 11 - EXECUTIVE COMPENSATION Executive Compensation The following table sets forth compensation awarded to, earned by or paid to CRW's Chief Executive Officer and the one other executive officers of CRW serving at the end of 1997 whose annual cash compensation exceeded $100,000 (collectively, the "Named Executive Officers") during the last three fiscal years. The table includes amounts paid in cash to such individuals by Casino and Credit Services, Inc., ("CCS") CRW's former parent company, from January 1, 1995 to May 10, 1995, but excludes compensation related to CCS stock options.
Summary Compensation Table Annual Compensation Long-Term Compensation ------------------- ---------------------- Securities Other Annual Underlying All Salary Bonus Compensation Options Other Name And Principal Position Year ($) ($) ($)(1)(2) (#) Compensation - --------------------------- ---- --- --- --------- --- ------------ J. Brian O'Neill 1997 $ 275,000 $300,000 $14,688 $ -- Chairman of the Board 1996 275,000 85,940 14,688 450,000 (2) and Chief Executive Officer 1995 275,000 137,500 14,632 450,000 Jonathan P. Robinson 1997 125,000 189,062 7,440 -- Vice President, Treasurer, 1996 125,000 39,060 7,440 90,000 (3) Secretary and Chief Financial Officer 1995 110,000 65,544 6,752 120,000
(1) Each executive officer pays $100 per month toward the lease payments with respect to his Company furnished car. The balance of the lease payments of $1,224 per month as to Mr. O'Neill, and $620 per month as to Mr. Robinson. (2) In May 1996, Mr. O'Neill received a warrant to purchase 610,160 shares of TLSP common stock from the Company for $1.50 per share. (3) In May 1996, Mr. Robinson received a warrant to purchase 76,316 shares of TLSP common stock from the Company for $1.50 per share. Option Grants in Fiscal Year 1997 No stock options were granted to any named executive officer in 1997. Aggregated Options Exercised in 1997 and Year End Option Values The following table sets forth certain information with regard to the aggregated options exercised in the fiscal year ended December 31, 1997 and the option values as of the end of that year for the Named Executive Officers.
Number of Shares Underlying Value of Unexercised Unexercised Options In-the-Money Options at Shares Value at FY End (#) Fiscal Year End ($)(2) Acquired Realized Exercisable (E) Exercisable (E) Name on Exercise ($) (1) Unexercisable (U) Unexercisable (U) ---- ----------- ------- ----------------- ----------------- J. Brian O'Neill -- -- 900,000(E) $1,534,500 (E) Jonathan P. Robinson 106,908 313,570 0 0
(1) Based upon the difference between the fair market value of CRW Common Stock and the exercise price of the relevent options on the date of exercise. (2) Based upon the fair market value of CRW's Common Stock of $3.16 per share as of December 31, 1997 determined by taking the closing price of the Common Stock on the NASDAQ Small Cap Market on the last trading date of the year. Compensation of Directors During 1997, each of CRW's non-employee directors received cash payment of $10,000 in consideration for their service on the Board. Directors who are also employees of CRW receive no compensation for their services as directors. Employment Agreements On May 11, 1995 the Company entered into Employment Agreements with J. Brian O'Neill as Chief Executive Officer and Jonathan P. Robinson as Vice President, Treasurer and Chief Financial Officer, each for a term of three years. These agreements provide for initial salaries for Messrs. O'Neill and Robinson of $275,000 and $125,000, respectively, reviewed annually, as well as performance bonuses based both upon performance targets for the Company's consolidated earnings and a subjective analysis of the Company's overall performance and present and future business prospects. The agreements also provide for grants of stock options to Messrs. O'Neill and Robinson under the Plan, to purchase 450,000 and 120,000 shares of Common Stock, respectively. The agreements may be terminated by the Company with or without cause, provided that if the Company terminates either agreement without cause, or if either party terminates either agreement following a Change in Control (as defined in the Employment Agreements) of the Company, the executive in question is entitled to all salary and bonuses which would have been paid to him for the remainder of the term of the agreement as well as continued employment benefits from the Company for the remainder of the term of the agreement. In addition, the agreements both contain a non-competition provision extending for one year after termination of employment for cause and six months after termination for any other reason; provided, however, that if an agreement is terminated by the Company without cause of if either party terminates the agreement following a Change in Control of the Company, the non-competition period ends upon the date of termination. ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL HOLDERS AND MANAGEMENT The following table sets forth certain information as of March 25, 1998 regarding the beneficial ownership of shares of CRW Common Stock by (i) each person known by CRW to own beneficially more than five percent of the outstanding shares of CRW Common Stock, (ii) each director of CRW, (iii) certain executive officers of CRW and (iv) the directors and executive officers of CRW as a group.
Number of Percent of Name and Address (1) Shares Class - -------------------- ------ ----- J. Brian O'Neill (2)(5) ....................................... 2,177,693 27.1% Jeffrey Tannenbaum (3) 1211 Avenue of the Americas New York, NY 10036 ................................. 1,113,803 17.3% Fir Tree Value Fund, L.P (3) 1211 Avenue of the Americas New York, NY 10036 ..................................... 792,790 12.3% Technology Leaders II, L.P. (4) 800 The Safeguard Building 435 Devon Park Drive Wayne, PA 19087 ......................................... 745,413 11.6% TL Ventures Third Corp.(4) 800 The Safeguard Building 435 Devon Park Drive Wayne, PA 19087 ......................................... 592,132 9.2% Eustace Mita (5)(6) ........................................... 169,800 2.8% Jonathan P. Robinson .......................................... 141,200 2.2% Mark DeNino (4) (6) ........................................... 104,702 1.6% Robert N. Verratti (7) ........................................ 57,500 * Bernard Morgan (7) ............................................ 57,500 * All executive officers and directors as a group (6 persons) (8) 2,708,395 32.6%
*Less than 1% (1) Except where otherwise indicated, the address of each beneficial owner listed is c/o CRW Financial, Inc. 200 Four Falls Corporate Center, Suite 415, West Conshohocken, PA 19428 and each beneficial owner has sole voting and investment power over all securities listed. (2) Includes 900,000 shares issuable upon exercise of stock options, 412,601 shares issuable upon conversion of a convertible subordinated note and 300,000 shares issuable upon exercise of a warrant. (3) Jeffrey Tannenbaum is General Partner of Fir Tree Value Fund and has voting and dispositive authority with respect to the 792,790 shares held by Fir Tree Value Fund, LP. Number of shares also includes 321,013 shares held be Fir Tree Institutional Value Fund LP and Fir Tree Value Partners LDC for which Mr. Tannenbaum has voting and dispositive authority. (4) A total of 1,492,847 shares of Common Stock are beneficially owned by Technology Leaders II, L.P., TL Ventures Third Corp., Mark DeNino and certain other related parties (the "TL Group"). Each member of the TL Group has affirmed that it is a member of a group under Section 13 (d) (3) of the Exchange Act and thus may be considered to have beneficial ownership of all securities of the Company held by any member of the TL Group. The above table, however, only includes securities actually held of record by the relevant securityholder and is based on a Form 4 filed on July 7, 1997. (5) Mr. O'Neill is Mr. Mita's cousin. Together, Mr. O'Neill and Mr. Mita beneficially own approximately 28.8% of CRW. However, Messrs. O'Neill and Mita disclaim being part of any group with respect to CRW. (6) Includes 97,500 shares issuable upon exercise of stock options (7) Includes 37,500 shares issuable upon exercise of stock options. (8) Includes 1,170,000 shares issuable upon exercise of stock options, 412,601 shares issuable upon exercise of a convertible subordinated note and 300,000 shares issuable upon exercise of warrants. ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS From December 1996 to August 1997, CRW leased an aggregate of 13,000 square feet in King of Prussia, Pennsylvania from 210 Mall Boulevard Associates, a partnership which is controlled by J. Brian O'Neill, CRW's Chief Executive Officer. The lease commenced on December 15, 1996 and requires monthly base rent payments through December 15, 2001 of $23,478. CRW believes the lease to be at the prevailing commercial market rate. From February 1997 to July 1997, NCO Group, Inc. subleased the facility from CRW. In August 1997, the sublease expired and the lease between CRW and 210 Mall Boulevard Associates was terminated. In 1996 and 1997, respectively, CRW paid $11,739 and $33,000 in rent to 210 Mall Boulevard Associates. CRW also subleases a 22,000 square foot facility in King of Prussia, PA from Cendant Corporation and has subleased the facility to TLSP. Cendant currently leases the facility from an unrelated party. However, prior to October 1997, Cendant leased the facility from CRW Building Limited Partnership, a partnership controlled by Mr. O'Neill. Prior to subleasing the facility to TLSP, CRW paid approximately $365,000 in rent in 1996 under the sublease from Cendant. In addition, CRW also leased office space in 1996 in Conshohocken, PA, from Lee Park Investors, L.P., a partnership controlled by Mr. O'Neill. The lease was assumed by NCOG on February 2, 1997. CRW paid approximately $46,000 and $4,000 in rent in 1996 and 1997, respectively to Lee Park Investors, L.P. In November 1995, Mr. O'Neill and his wife (collectively, "Lender") made a $1 million loan (the "Loan") to the Company and the company executed a convertible subordinated note (the "Note") in favor of Lender. The Note bears interest at 12.5% per annum, is payable in equal monthly installments of $33,454 and matures in November 1998. The Company also paid Lender a commitment fee equal to one percent of the amount of the Loan in consideration for making the Loan. The Loan was used by the Company to purchase certain computer equipment in which Lender obtained a security interest and for general working capital of the Company. The Note is convertible at any time during the term thereof and for one year thereafter into shares of Common Stock at a current conversion rate of $1.625 per share based on the principal then outstanding on the Note. Principal paid by the Company during the last fiscal year may also be converted into Common Stock at the same conversion price. As of March 25, 1998, the Note was convertible into 412,601 shares of Common Stock. The Company also entered into a Registration Rights Agreement with Lender which provides Lender with certain piggyback and demand registration rights with respect to the Common Stock which may be obtained upon conversion of the Note. The piggyback registration rights remain in effect for five years until November 1, 2000, and the demand registration rights may only be exercised during the last year of such period. The Company caused the formation of TeleSpectrum Worldwide Inc. ("TLSP") and subsequently during May 1996 received 8,510,137 shares of common stock in TLSP, par value $0.01 per share in consideration of a capital contribution of TLSP of $1.6 million in cash and the assignment to TLSP of a promissory note in the amount of $500,000. On August 13, 1996, TLSP completed an initial public offering of approximately 12.2 million shares of its common stock, at a public offering price of $15 per share (the "IPO"). The capital contribution made by the Company to TLSP represented proceeds of borrowings by the Company under subordinated notes (the "Subordinated Notes") issued to eight individuals, one partnership and one corporation (the "Lenders") on May 22, 1996. The capital contribution was used by TLSP for professional and other costs associated with the IPO. Amounts outstanding under the Subordinated Notes bear interest at 12% per annum. The notes were repaid in September 1996. As part of the consideration for the Subordinated Notes, the Company issued to the Lenders warrants (the "Lender Warrants") to purchase a total of 1,433,454 shares of TLSP's common stock held by the Company. The Lender Warrants are exercisable at any time during a 10 year term at a price of $1.50 per share. In connection with TLSP's initial capitalization by the Company, TLSP granted the Lenders the right to have TLSP shares of common stock subject to the Lender Warrants registered under the Securities Act along with the registration of any other shares of TLSP common stock and also the right to certain demand registrations subject to the Lenders' agreement not to sell any TLSP common stock underlying the Lender Warrants during the 180 days after consummation of the IPO by TLSP. During 1996 and 1997, 1,365,204 of these warrants were exercised. In connection with the sale of the Company's debt collection business on February 2, 1997, J. Brian O'Neill, CEO and Jonathan P. Robinson, CFO entered into non-compete, non-solicitation and non-disclosures agreements with NCO Group, Inc. The agreements have a term of three years and prohibit Messrs. O'Neill and Robinson from working in the debt collection industry or otherwise disclosing certain information or soliciting NCO employees during the term of the agreements. Messrs. O'Neill and Robinson received $500,000 and $250,000, respectively in exchange for entering into these agreements. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CRW FINANCIAL, INC. By: /s/ J. Brian O'Neill --------------------- J. Brian O'Neill Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signature Title Date --------- ----- ---- /s/ J. Brian O'Neill Chief Executive Officer and Director April 30, 1998 - ----------------------------- (Principal Executive Officer) J. Brian O'Neill /s/ Jonathan P. Robinson Chief Financial Officer and Principal April 30, 1998 - ----------------------------- Financial and Accounting Officer Jonathan P. Robinson /s/ Robert N. Verratti Director April 30, 1998 - ----------------------------- Robert N. Verratti /s/ Bernard Morgan Director April 30, 1998 - ----------------------------- Bernard Morgan /s/ Mark DeNino Director April 30, 1998 - ----------------------------- Mark DeNino /s/ Eustace W. Mita Director April 30, 1998 - ----------------------------- Eustace W. Mita
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